The logic makes perfect sense on the surface. Billionaires are incredibly rich for a reason. If you do what they do, you may become rich too.
Investors who want to ride the world’s elite financial coats may want to think twice about being a mirror of their trends. Poaching their stocks may not work with your particular situation, and worse, your portfolio may not cause you to reach its full potential. Here are three reasons why you might be better off doing your own thing.
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1. Billions can live on interest and share payments on their own
How much do you have to live in a particular year? The average employee in the United States brings home about $ 1,000 per week, according to data from the Bureau of Labor Statistics, or about $ 50,000 per year. Sure, we’d all like to take home a little more than whatever we earn now, but most people with so much income work before and during retirement.
In fact, most of us need to save and invest a portion of our income for retirement if we are to maintain our standard of living in our golden years. We also need to invest carefully to make sure we stay on track. That means maintaining a fair and tidy package to protect against the unexpected.
Billionaires do not have the dreaded problem of deciding whether to stay in the present or prepare for the future. They can do both without sacrificing more. Accepting the S&P 500With an average share yield of just 1.5%, a billion-dollar investment in the market as a whole generates revenue of $ 15 million per year. That is not only more comfortable, but that income stream means that the rich will be able to stick to stocks that pay dividends even when it is difficult. You may not have such an option.
2. They already have a nest egg
Similarly, billionaires don’t have to build a nest egg. They already have a big one.
Yes, a large cash stash generates reliable installment payments, interest payments, or even rent payments if that person or family owns property. Stable income is not the only big benefit of having a billion buckets. The edge of Billionaires is really the flexibility they have with any stock they have. While you may be forced to make a tight sales decision now to make sure you are going to achieve the targeted value of your portfolio in the future, billions don’t feel the same weight . They are able to truly be the buy and hold investor that the average employee wants to be.
That’s the long way from saying that billionaires are capable of surviving a long-term performance drought from some of their stocks that can give you ulcers.
3. Wealthy people have access to investment options that you do not have
Finally, if you think billionaires are playing on a level playing field, think again. Most of them have access to opportunities (and information) that you don’t get.
Take Warren Buffett as an example. Yes, Oracle Oracle is great, and Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) the long-term performance results are there to be confirmed. Berkshire Hathaway is not just a collection of publicly traded stocks. Berkshire also has a few dozen private companies such as Duracell batteries, Benjamin Moore paint, and Acme Brick Co. just to name a few. While Buffett makes or loses money on the ever – changing stocks with Berkshire, these private outfits generate money for the company regardless of the market environment. Their steady cash contribution to the fund’s bottom line allows Berkshire managers to hold on tight to struggling stocks. They may not be so bold without that recurring cash flow.
Another big win from Buffett came shortly after the collapse of the 2008 subprime mortgage and the devastation it caused to most stocks – banking stocks in particular. Yes, a Berkshire resident guru was expected to pour in billions of dollars Bank of America (NYSE: BAC) while he was down. It was not at all as dangerous as it seemed to be on the surface, however. The Oracle of Omaha was also given the option to buy another 700 million shares of BoA years down the road at a price of around $ 7 per apiece – a perk donated for taking the big bank mach.
If you didn’t already have a few billion to lend to Bank of America (and were willing to do so at the time), you wouldn’t have gotten the same sweet deal. In fact, if Buffett didn’t get the deal, he probably wasn’t as fond of the bank either.
Baseline
Don’t read too much into the message. There are certainly still many great ideas to be gained from building a billionaire stock. But those aren’t the best options for you though. You’re usually better off doing your own thing first.
This article represents the opinion of the writer, who may not agree with the “official” recommendation position of the Motley Fool chief consulting service. We are motley! Questioning an investment dissertation – even one of our own – helps us to think critically about investing and make decisions that will help us become softer, happier and richer.